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The Performance Management Gold Rush

/in /by BPM Partners

Craig Schiff , President and CEO, BPM Partners

Updated July 2021

Overview

Casual observers have probably noticed some of the new investments made in the performance management space this year. As dedicated followers of the space we have tracked almost all of them, and the volume (both number of deals and total dollars) in such a short period of time is truly astonishing. This is nothing new for performance management as we have seen similar hot streaks in the past, but the number of vendors involved, the deal size, and the valuations take it to a new level.

Deals

Let’s start by summarizing the deals and their key attributes.

 

Vendor (links to PerformancePlace)  Date of Deal (links to announcement)  Dollars (* our estimate)  Type    Notes
Jedox January 2021 $100 million + Private equity
Prophix January 2021 $400-$500 million* Majority investment
Board March 2021 Not disclosed Ownership expansion Added new CEO
Cube March 2021 $10 million Series A New Vendor
Unit4 March 2021 $2.1 billion Buyout ERP/FP&A vendor
DataRails April 2021 $18.5 million Series A New vendor
OneStream April 2021 $200 million Series B $6 billion valuation
Vena April 2021 $300 million Series C
Fluence May 2021 $10 million Series A Added new CEO
insightsoftware July 2021 $1 billion Minority investment $4 billion valuation

That’s over $4 billion invested in performance management vendors in just the first 7 months of the year! While the big dollars went to established vendors, there are a number of newer vendors getting funded as well. One of the most interesting things to note here is that OneStream’s latest round values it at $6 billion dollars. The acquisitions of two major vendors I was part of didn’t come close to that valuation. Oracle picked up Hyperion for a little more than half that amount, and SAP’s purchase of OutlookSoft was significantly less.

Analysis

So, what’s driving this ‘gold rush’ in the performance management space? Success. This is not some buzzy new technology, although the fact that all of these vendors started in the cloud or have moved their product and market focus there certainly helps. Performance management systems are mission-critical front office business software solutions. They have benefited from two major trends: Finance transformation, and the need for greater agility necessitated by the challenging business climate caused by the pandemic. While many businesses struggled this past year, just about every performance management vendor we have spoken with achieved or exceeded their pre-pandemic budget targets.

With money flowing and demand increasing many new vendors have recently entered the space. In addition, existing vendors around the periphery have rebranded and repositioned to take advantage of the opportunities related to performance management. Some of these newer or relaunched vendors include the already mentioned Cube, Fluence, and DataRails, as well as Acterys, Place, OnPlan, MYGIDE, BankBI, Synario, Quantrix, Limelight, and Jirav.

What does this all mean for prospective purchasers of these products? The larger vendors will use their new investments to expand their offerings as well as their geographic reach. The newer vendors will build out their product suites and invest in sales and marketing. This will result in a great selection of solutions to choose from, in fact possibly the widest range of options that has ever existed in this space. While it all sounds wonderful, not all is rosy. We have recently met with every vendor mentioned here and more. For established vendors who haven’t’ recently raised funds it may get more challenging to compete with vendors flush with cash. For some of the newer vendors, as you might expect, their marketing messages are a little ahead of their current product realities. Hopefully it will all settle out over time. With great choices, comes great responsibility: it is more important than ever to do your homework and make sure you choose the best solution for your organization.

 

Hg Acquires Majority Stake in Prophix

/in /by BPM Partners

Craig Schiff , President and CEO, BPM Partners

Overview

The trend of significant investments in the performance management space continues into 2021. It was announced last week that Hg, a global investment firm with a focus on software and service businesses, has taken a majority ownership stake in Prophix, a successful midmarket focused performance management vendor.  The first question people usually ask when they hear about these acquisitions is: how much did they pay? It has not been publicly disclosed and I’m not one to spread rumors, so you’ll have to do your own research to find the answer to that question. From what we‘ve heard though, the investment does indicate a fairly significant valuation of the company. The second round of questions that people often ask includes: how will this impact the vendor and their customers, prospects, and competitors? Those questions are much easier for us to answer.

Prophix

Prophix has been around for over 30 years and has over 1,600 customers. More importantly, they have a solid product with a broad range of capabilities that supports both financial and operational planning and reporting. We have met with the team many times over the years and they are very focused and know exactly where they are going. They are also highly thought of by their customers. In fact, our own BPM Pulse Survey confirms the high levels of satisfaction they have achieved (see their current BPM Pulse rating here). The main knock we have heard about them is that they are overly cautious and risk-averse. That’s interesting because that can also describe their target customer in Finance. This may explain why several of their prospects have told us they felt a greater cultural kinship with Prophix than with the other vendors they were considering. This slow and steady approach does sometimes have a cost though. They were late to the party with a cloud-based solution and may have missed out on some opportunities, but in the end they did ultimately deliver a well-received solution.

The Competitive Landscape

The midmarket performance management space is the place to be. In the past year we personally were involved in many deals in the space, even in the middle of a pandemic. In fact, the economic environment may have caused some companies to toss their spreadsheets or legacy systems sooner than planned. From a midmarket vendor perspective, the landscape has evolved over the years. Up until fairly recently Adaptive Planning (Adaptive Insights) dominated this market segment. Since their acquisition by Workday that has changed. While they are still included in many midmarket deals, our experience is that they don’t end up as a finalist as often as they used to. Some of this is due to the fact that they are often the most expensive midmarket vendor in the deal. In addition, they appear to be self-selecting for deals that will also include other Workday solutions. This of course makes perfect sense, but results in them focusing on a subset of opportunities. Other vendors have swooped in to fill the gap and there is now  a good array of top-rated solutions to choose from. This space is also about to get even more competitive. Some new venture-backed vendors (see Jirav and PlaceCPM as just two examples) have entered this market in the past year or two and are focused on the lower end of the midmarket. They don’t intend to stay there forever, and as they flesh out their product sets they plan to move up into the core midmarket performance management space.

Impacts of the Deal

We met with Hg several times last year and provided our research to them as part of their due diligence process. We believe they have a good understanding of the space, the opportunities as well as the challenges, and are in it for the long haul. Based on the structure of the deal as we understand it, Prophix employees had an opportunity to participate as well. So, from a Prophix perspective it looks like they found a knowledgeable investor that will help them grow the product set, the team, and their global footprint. With their product and team they were already in a good position to do battle, but sometimes you just need more resources. This is especially true when you consider that competitors Planful (formerly Host Analytics) and Vena Solutions had recent infusions of capital as well, and just this week Jedox also joined in.

From a customer and prospect perspective there seems to be little risk, only potential upside. With more funds Prophix can accelerate the rollout of new product features, expand customer support offerings, open offices in more locations, add more voices to the user community, and perhaps even acquire a complementary product.

For competitors there may be a valid concern that this will make Prophix an even stronger foe, but on the other hand this new investment is further confirmation that there is significant growth still to come in this market segment. From what we have seen in just the past year we are confident there will be continued growth and more than enough opportunities for all the key midmarket players to prosper.

 

The Best Analyst Reports for Performance Management 2019

/in /by BPM Partners

Craig Schiff , President and CEO, BPM Partners

Overview

It seems every year there are more and more reports covering the business performance management space of budgeting, planning, forecasting, consolidation, reporting, and analytics. None of these reports (even the ones from BPM Partners) tell you everything you need to know to make the right purchase decision. However, they are useful as a starting point, a way to get educated and begin to identify your short list. As you would expect, some reports are more useful than others. It all depends on what you are looking for.  Let’s briefly look at each of the major reports and show you where you can get a free copy.

Available Reports

There are a number of reports available today that focus on various aspects of performance management. Here is a key to the major reports:

BARC Planning Survey – Presentation of survey results with analyst commentary for planning in general and 22 products in particular, from a European-based research firm. Also offers Business Intelligence focused reports.

BPM Partners Vendor Landscape Matrix – Analyst overviews, feature checkboxes, ‘best fit’ analysis, pricing, and customer satisfaction scores for 17 budgeting, planning, reporting, and consolidation vendors.

Dresner Advisory Wisdom of Crowds EPM Market Study – Presents survey results with a focus on enterprise planning and rankings of 13 vendors. Also offers similar reports focused on Business Intelligence.

Gartner Magic Quadrant for Cloud FP&A Solutions– Analyst review of strengths and cautions for 15 vendors. Similar report available for 10 Cloud Financial Close vendors.

Nucleus Research CPM Technology Value Matrix – Analyzes usability and functionality of 18 performance management vendors. Also offer ROI case studies.

While the reports listed above are typically updated on an annual basis, there are also several analyst reports that are either specialized one-shots or infrequently updated. They include Aberdeen – ROI of Sales Planning Analytics, Bloor – From Insight to Action, Forrester – Total Economic Impact, and IDC – MarketScape: Worldwide EPM Market.

Free Copies of Analyst Reports

Now that you have an idea of what reports are available, here is how to get your own copies of the ones that are most relevant to you, all at no cost.

BPM Partners offers a free subset of its Vendor Landscape Matrix report comparing two vendors of your choosing, available here: Vendor Snapshots

For all other analyst reports the links provided below will take you to each vendor’s PerformancePlace page on this site. The free report links for the listed analysts are in the ‘Industry View’ section of each page.

Axiom Software (Kaufman Hall) (Gartner), Board (BARC, Bloor, Dresner Advisory, IDC, Nucleus Research), CCH Tagetik (Wolters Kluwer) (BARC, Gartner), Host Analytics (Dresner Advisory, Forrester, Gartner, IDC, Nucleus Research), IBM (Aberdeen, BARC, Gartner), Jedox (BARC, Dresner, Gartner), Longview (BARC), OneStream (BARC, Dresner Advisory, Gartner, Nucleus Research), Oracle (Gartner), Prophix (BARC, Dresner Advisory), SAP (BARC, Gartner), Vena (Nucleus Research)

Note on free copies: As you’re well aware, nothing is ever totally free. In most cases the vendor you request the report from will probably follow up with some marketing outreach. It’s only fair since each of these reports would normally cost hundreds of dollars or more. Therefore, it makes sense to request the report from a vendor that you wouldn’t mind hearing from and potentially learning more about.

Performance Management’s Hot Streak

/in /by BPM Partners

Craig Schiff , President and CEO, BPM Partners

Overview

Over the past 5 months the performance management market has seen significant interest and investment. Not just from customers, but from venture capital firms and other software companies looking to gain a foothold in this market. Here is a timeline of the major announcements:

October 2018 – Adaptive Insights is acquired by Workday

November 2018 – Anaplan goes public

December 2018 – Host Analytics is acquired by Vector Capital

January 2019 – Vena Solutions receives a $115 million investment from JMI Equity and Centana Growth Partners

February 2019 – OneStream Software receives a significant investment from KKR (rumored to be approximately $500 million)

Background

The performance management market hasn’t seen this much activity since 2007 when Cognos was acquired by IBM, Hyperion was acquired by Oracle, and OutlookSoft was acquired by SAP (they also acquired Business Objects which had just acquired Cartesis that same year). However, that series of acquisitions was focused on enabling the acquiring companies to replace their existing (and mediocre) performance management offerings with market-leading ones. In effect, it was a market consolidation since the smaller, independent vendors were absorbed into the larger vendors and the existing solutions they replaced were phased out.

What is happening today is the opposite of what happened in 2007: this round of activity is all about expanding the performance management market. All of the companies identified above continue to sell their product lines with varying degrees of independence, but with significant new capital behind them. The goal is to enable them to grow faster than they could have on their own.

What does this mean from a customer/prospect perspective?

The Good: All of these companies are now more viable than they were prior to this activity. Concerns about relatively small, independent vendors not being around for ongoing support are greatly reduced. New product development can be accelerated, support staffs increased. Of course sales and marketing investments will also increase creating a larger community of customers to be a part of. All of the investments will keep these vendors active and growing.

The (Potential) Bad: New owners/board members can take the vendor in a new direction that doesn’t align with existing customer needs. An influx of capital and rapid expansion can lead to distraction and unmanageable growth with leadership being stretched thin. Key team members can cash out and leave the company. There is also the risk that the remaining smaller performance management vendors are no longer able to compete with these vendors who are flush with cash. This can lead to some of them becoming niche players or disappearing entirely, unless they find their own suitors.

The net however is that it is a great time to be a performance management customer. This is a thriving, competitive market with a wide selection of proven solutions available for companies of all sizes. This new investment will help expand the footprint of performance management within companies as well as across the globe.

Learn More about these Vendors

Host Analytics to be Acquired by Vector Capital

/in /by BPM Partners

Craig Schiff , President and CEO, BPM Partners

Note: Includes updated information (1/2/19)

Overview

Host Analytics has announced a definitive agreement to be acquired by Vector Capital,  a leading private equity firm specializing in transformational investments in established technology businesses. The deal has now officially closed. The terms of the deal have not been disclosed.

Why This Deal?

Demand for performance management solutions is growing but at the same time the vendor landscape is undergoing significant changes. Adaptive Insights was acquired by Workday earlier this year, Anaplan has become a public company, the larger vendors are in the midst of a multi-year transition from their legacy on premise solutions to brand new cloud offerings. Vendors that had been targeting the midmarket are looking to move upstream. Even long established performance management implementation firms such as TopDown Consulting and Edgewater Ranzal are being acquired. There is an opportunity here to take advantage of the uncertainty all of  these changes create, particularly in the $ 250 million to $ 2 billion slice of the market.

What’s needed to fully exploit this opening? A capable management team, a competitive product set, and deep pockets. Host Analytics already has the right team and product, Vector Capital brings the deep pockets (as well as operational resources and expertise).

Working with a company like Vector Capital has unique benefits and avoids the pitfalls of merging with a larger software company. Let’s start with the pitfalls. Whenever two software companies merge there are a number of inherent challenges – overlap in management, overlap in products, years of product integration work. The management overlap often leads to key team member departures, the product overlap leads to some products being killed or refocused, and the years of integration work often detract from product innovation and expansion of functionality. All of this negatively impacts sales, customer satisfaction, and morale. A key benefit of a venture firm owner is the enhanced ability to find and acquire complementary solutions. The acquisition of performance management vendor Longview Solutions by Marlin Equity several years back illustrates this fairly well. Soon after their acquisition by Marlin, Longview acquired arcplan for BI/analytics and Tidemark for cloud-based planning. Host Analytics may now be able to accelerate its ability to deliver on its vision for the Office of the CFO.

Why Now?

While the timing of this deal certainly reflects the desire to take advantage of  the opportunity in the market today, I’m sure there are other motivations as well. Perhaps some of the original investors/board members are ready for a change. This is a straightforward way to enable them to cash out and pursue other challenges. Board member rotation also benefits Host Analytics with new ideas being brought to the table. It is worth noting though that the largest shareholder, StarVest Partners, will remain a significant investor.

Final Thoughts

In spite of this deal, Host Analytics remains a picture of stability in a rapidly changing market. It will continue to be run as an independent business. Dave Kellogg, long-term CEO at Host, is being replaced on an interim basis by the current Chief Revenue Officer, and the interim CFO role will be filled by a Vector Capital VP. There are no other announced or anticipated management changes at this time. Host is following its existing product roadmap and continuing to roll out new updates and partnerships. Of course we need to see how this all plays out once the transition is complete, but on the surface it seems like a good deal for all concerned.

More about Host Analytics

Adaptive Insights to be Acquired by Workday

/in /by BPM Partners

Craig Schiff , President and CEO, BPM Partners

Overview

Adaptive Insights announced that they have a reached an agreement to be acquired by Workday. The deal is expected to close in October of this year. Let’s take a look at what this means for the companies involved, their customers and prospects, and the performance management industry in general.

The price that Workday is paying of $ 1.55 billion is one of the highest ever for a performance management vendor. It is a significant multiple of Adaptive Insights’ trailing 12 -month revenues of  $ 114 million. This valuation is both indicative of the growing importance of performance management solutions (which was also confirmed by our 2018 BPM Pulse Survey) and the strategic importance of this acquisition to Workday to strengthen their product portfolio.

Products

Adaptive Insights (for Finance) has been one of the more successful standalone performance management products with almost 4,000 customers worldwide. Just this past year they introduced a product aimed at sales planning: Adaptive Insights for Sales, and launched their Elastic Hypercube technology to better handle the volumes of data and complexities in larger companies. They had recently filed for an IPO. It is clear why they were a prime target for a vendor looking for an established, robust planning solution to acquire.

Why was Workday looking for a new planning solution? They recognized a while ago that performance management was a key missing ingredient from their financial and human capital management solutions. So, they did what many others have done – built their own. However, just like SAP, Oracle, and IBM before them, they realized  their homegrown solution was years behind the market leading solutions and would take significant time and money to catch up. While they partnered with several of the stand alone performance management vendors, their vision of an all-in-one business management solution was not coming to fruition.

Strategy

With Adaptive Insights looking to raise capital through an IPO the timing was right for Workday to swoop in and acquire an ideal solution for the planning needs of their customers. There is redundancy and overlap with the existing Workday Planning solution, but they have a strategy to address that. The existing solution will be focused on the HR/human capital management side of the equation and Adaptive Insights will play to its strength in financial management. The current Workday sales force will introduce the Adaptive Insights product set into up market opportunities. The current Adaptive Insights sales force will focus on the rest of the market. The Workday and Adaptive Insights products will be “‘integrated” over time at a UI/common look and feel level, meta data, data, and security levels.

Final Thoughts

At this early stage there are many things that are not clear. Will Workday focus its efforts on selling Adaptive Insights to its existing customers and to new accounts that are looking to purchase their full suite, or will they also actively compete in the open market for standalone planning deals? I would guess it would be the former, but we just don’t know. With Workday’s historic focus on the large/enterprise market where will the midmarket fit into their overall strategy going forward? Only time will tell.

For now, there are some clear winners: Workday – for filling an important gap in their offerings with a well-regarded solution, Adaptive Insights – for becoming part of a larger organization with greater resources at its disposal and a mostly complementary product set, as well as achieving an impressive valuation, Workday customers – for having a robust new performance management solution available to them, although they need to keep an eye on integration status, Adaptive Insights competitors – for the potential to take advantage of this period of change and uncertainty, and the performance management industry in general for confirmation of its growing importance and value.  In addition, we’re confident that Adaptive Insights customers will be well taken care of, based on our direct experience with Adaptive  since its launch 15 years ago, and confirmed by their consistent high marks in our annual  BPM Pulse customer satisfaction survey.